Looking ahead to Apple’s quarterly earnings later today, which are expected to disappoint, Victor Basta, managing director of Magister Advisors, argues that a focus on innovation is the wrong tactic for the technology giant, and instead the firm should focus on a broader strategy.
If, as some are forecasting, Apple’s device sales are disappointing, the very worst thing the company could do is double down on device innovation. One definition of madness is to repeat what you have done historically and hope for a different result.
Apple in our view is a business going through a necessary transition from hardware as the dominant revenue stream. The right thing for Apple to do is to broaden themselves out, serve their huge community of credit card enabled customers, and focus on micropayments and software.
The world now is awash with device innovation. Devices are of course a fundamental part of Apple’s offer and will remain so. The point is that the device market is now hugely competitive and Apple should focus on simply being competitive – or good enough in other words. What is needed is a balanced approach in the business.
If you see Apple as an ecosystem of credit card-enabled customers making micropayments, they only have one really significant competitor, Amazon, a business that begins to look more and more like Apple every day. We will hear more from Amazon later in the week and that will give us a much clearer picture of shifting industry dynamics.
By Victor Basta
Managing Director
Magister Advisors